IntroView

Markets continue to rally on hope of a resolution to the euro zone debt crisis. A plan appears to be coming together, although big banks are pushing back on the amount of losses they will have to take on their Greece holdings. Also, another vote is required of the German Parliament, which will take place on Wednesday. Beyond Europe, Caterpillar posted great earnings and there are signs of economic life coming out of China. So, for now, the embrace of the euro zone plan is full on... until it is not.
 

Petroleum Markets   
     
Financial market have voted the weekend efforts of European policymakers a tepid affirmative. Asian and early European equities are up somewhat as is crude oil. Data showing that Japanese exports rose more than forecast last month and Chinese manufacturing expanding speaks directly to energy demand growth. Still, with the euro shedding value in the early going to the benefit of the dollar and US equities moving down from the intraday high, crude has surrendered some gains and now is mired right in the middle of the day's range and only about .50 higher on the day. But the contest in the financial markets remains one of policymakers versus market makers who will have the final say. Speculative interests increased length for the first time in weeks according to Friday's Commitments report. So far, the market's momentum has been positive, if inconclusive. Price movements will probably be volatile as markets respond to the next headline, reserving final judgment for Wednesday when a final resolution is supposed to appear.


Petroleum Tech Talk    

Last week's price action produced a high of 89.69, but surrendered over $5.00 of those gains he very next day, finishing the week only. .60 cents higher. Hardly a move that can be characterized as overly bullish. But the inability to generate momentum on either side shows participants' indecision. Right now the market seems to be confined to last month's high of 90.00 or so and the recent low near 83.00. We still think a test of 75.00 is probable which could carry through to our target in the mid-60s. However, the oscillator turning up Thursday and Friday along with the increased volume and open interest shows the market's inherent strength. Also the market has been above the 13-day MA for over two weeks, the longest streak since prices broke down from $115.00 in May. These divergences will keep our bias neutral for the moment.


Natural Gas         
 
Gas prices are up again today as participants look towards rising heating load as autumn weighs on the mercury. The Baker Hughes report also registered a drop in the number of active rigs suggesting that production is slowing a bit. But inventories will begin the heating season just below record levels, and strong production gains this year will add an extra 3 bcf per day to supply versus last year, or about 450 bcf from November through March which will still put prices on the defensive next year. With stockpiles at 3.624 Tcf, winter needs to show up soon for prices to hold these levels or higher. The inventory deficit relative to last year has narrowed sharply from its June peak and the gap should shrink more in coming weeks as moderate weather suggests more injections in the approximately three weeks left to the stock building season.


Natural Gas Tech Talk    
            
The market keeps rejecting the overhead resistance at 3.64. what we mean by that is that each violation shows a loss of momentum rather than follow-on buying. The recent high of 3.7700 now takes on additional importance with 3.64 violated numerous times without result. A breach of that marker should open the way to 3.853, the point from which the last leg down commenced. The upside should be contained by last month's high of 4.143, and if so it will suggest that the market has room for further decline below 3.446. However a break above 4.143 will target 4.612 where the market broke down from in July. For the moment though a trading range should prevail defined by the recent low at 3.446 and 3.77, waiting for a break of either side. Until that occurs, we will keep our bias neutral.

source: KilduffReport.Com